US and European stocks fell sharply yesterday as investors fled the market on signs that al Qaeda may have been behind the Madrid bombings, generating worry about additional violence.
The Dow ended down 137.19 points,or 1.34 per cent, at 10,102.89, its lowest close since the middle of December.
The technology-focused Nasdaq fell 45.53 points, or 2.29 per cent, to 1,939.20.
Security fears also pushed European blue-chip shares to their lowest levels this year.
Investors, already wary after disappointing US employment figures earlier this month, sought safe-haven bets such as government bonds and gold after the discovery at the weekend of a videotape from a purported al Qaeda spokesman claimed responsibility for the blasts.
The FTSE Eurotop 300 index of pan-European blue chips closed 1.9 per cent weaker, having shed 3.2 per cent last week as global growth concerns were compounded by heightened security fears after the Madrid bomb blasts.
The narrower DJ Euro Stoxx 50 index ended down 2.8 per cent at 2,756.1 points, its lowest close since December 30th, 2003.
Some analysts said they believed the sharp reaction in recent days had been overdone.
The Irish market held up reasonably well amid the wider declines, limiting its losses to just 0.5 per cent.
Dealers nonetheless reported nervousness among investors as they allowed the market to drift lower on relatively low volume.
"Everybody's a little bit spooked," said one trader, adding that the ISEQ was "very much a buyer's market" at the moment.
Around Europe, London's FTSE 100 closed 1.2 per cent weaker, while Paris's CAC-40 ended down 2.4 per cent.
In Zurich, the SMI fell 1.4 per cent and Frankfurt's volatile DAX closed 2.7 per cent weaker.
Insurers, which tend to exaggerate broader market moves because of their large equity holdings, were among the worst performing stocks.
Dutch firm Aegon tumbled 5.1 per cent while Germany's Allianz fell 5 per cent and France's Axa shed 4.3 per cent.
In Dublin, Irish Life and Permanent lost almost 1 per cent.
Airline stocks also moved lower as investors shied away from the sector on fears travel could be hit by further global security concerns.
Ryanair fell 1 per cent to close at €4.60.
Spain's IBEX-35 index fell 4.2 per cent, leading European declines, after the surprise victory of Mr Jose Luis Rodriguez Zapatero's Socialists in weekend elections.
Meanwhile, oil prices raced more than $1 higher yesterday as signals that al Qaeda was behind last week's bombings in Madrid raised fears of future attacks that could disrupt energy supplies.
US light crude prices closed up $1.21 at $37.40 a barrel, bringing them near fresh one-year highs hit last week, while London Brent crude jumped $1.52 to $33.76 a barrel.
The dollar also lost ground yesterday as a report that Japan's central bank is considering scaling back intervention added to dollar-negative variables such as the Madrid bombings.
The dollar dropped over 1 per cent on the news of intervention by the end of March.- (Reuters)
